Thursday, Nov 21, 2002
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In a meeting with the RBI Governor, Bimal Jalan, on November 18, the Federation of Indian Export Organisations (FIEO) pointed out that the cost of export credit should be linked with the Bank Rate since pre and post-shipment credit cost continues to be high. "Despite the recent cut in the Bank Rate and the cash reserve ratio (CRR) by the RBI, pre and post-shipment level crosses the double digit level," FIEO President, P. D. Patodia, told PTI, referring to his meeting with Dr. Jalan. At present, banks link export credit with the prime lending rate (PLR) which is still high at about 9 per cent.
Mr. Patodia said exporters also emphasised the need to issue clear guidelines for providing pre and post-shipment finance at liberal norms. "Exporters often report that funds are not given by banks against letter of credit on the premise that the proposal in question is not viable. We have suggested liberalising these lending norms to facilitate exports," he said. Though percentage lending to the export sector had been pegged at 12 per cent of the banks' lendable resources, a minimum lending percentage should be prescribed for all scheduled banks and RBI should ensure its compliance.
Mr. Patodia said exporters also suggested flexibility in the Exchange Earners Foreign Currency Account in line with the flexibility provided by the RBI for the non-resident external and non-resident ordinary account. "We have suggested that EEFC account holders should be allowed to avail facilities such as allowing an export house to open fixed and saving deposit account," he said.
The FIEO also sought the central bank's nod for pledging or using the EEFC balances as margin money in the case of export house borrowings while demanding flexibility in accordance with capital account convertibility, the association president said.
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